Monday, November 16, 2009

Commercial contracts have standard clauses regarding such matters as venue for legal disputes, the state law governing the contract, and odd clauses such as integration clauses that do not seem important at the time that the contract is being signed.

For consumers, such standard clauses are often unenforceable since the parties don't have equal bargaining power.

Not so in commercial contracts. The courts will enforce them even if they seem very unfair. Many business owners have contempt for such clauses and refer to them as boiler plate. However, such standard clauses can be critical.

If you get into a dispute with the other party, you may have to litigate that dispute in a county or state that may make it difficult or even impossible to successfully resolve the dispute. Many standard clauses are also are critical in interpreting the relationships between the parties.

The clause that states that the contract contains the entire agreement between the parties means that no other agreements or negotiations between the parties can be introduced to show the parties' intentions. That can be very harmful if two companies enter into a series of related transactions. The point is that business owners must pay attention to these clauses when they enter into commercial contracts.

The courts hold businesses to these clauses in commercial contracts and they can be very destructive. They can also be very helpful. In the video portion of this blog entry, I mention the case of City of Hope vs. Genetech. This was a very complex case in which the defendant Genetech was sued for several things having to do with patent licenses and contracts between the parties. The City of Hope obtained a huge damage award at trial including punitive damages for breach of fiduciary duty.

On appeal, the punitive damages were struck down on the grounds that the standard clause of the parties contract contained a clause that stated that the parties did not intend to create a joint venture, partnership or similar relationship between them. The court held that that clause showed that the parties did not intend to create a fiduciary relationship between them. Genetech was saved by boiler plate from having to pay millions in damages.

Friday, November 6, 2009

The old saying goes "Desperate Times Means Desperate Measures". Unfortunately, many people are currently desperate, for work, for cash flow, etc.

I have increasingly heard more and more stories of individuals who have been victimized by desperate professionals or trades people. Auto owners are sold service that they don't need. Contractors under-bid projects and leave them unfinished. Mortgage lenders and real estate agents outright lying to homeowners.

And attorneys. Attorneys who take on cases that they can't handle, or should not take. Attorneys who over bill their clients, or over-promise what the attorney can deliver.

I hate to say it but individual consumers and business owners must be careful these days when they retain an attorney. I saw an excellent article today that can help in this matter. The article urged attorneys to provide a Risk Benefit Analysis prior to any litigation matter. Such an analysis weighs the benefits of the litigation with the risks and costs. I thought this was an excellent idea and it got me thinking about what consumers and business owners should look for in an attorney in these days.

I suggest the following in evaluating an attorney:

1. Expertise. This includes experience but also how much of the attorney's practice is devoted this type of matter. Is the attorney well versed in this area of law or just taking on your matter to make some fees.

2. Compare. Independently review the qualifications of a few attorneys.

3. Risk/Cost - Benefit. Prior to any litigation ask the attorney to give you an analysis, in writing, of the benefits, risks and costs of the matter. They should be very frank and you should not be too happy with the attorney's assessment if the attorney is honest with you.

4. No flattery. Do not retain an attorney who continually tells you what you want to hear. Attorneys are in the business of bringing their clients down to earth as to what can and not be accomplished. No attorney should continually tell you that are completely right, that you can get everything you want, etc. If that is the case, do not hire that lawyer.

5. Insist on communication. Insist that the attorney communicate with you about every step of the legal process, particularly for litigation matters. Insist that the attorney inform you of approximately how much you will be billed as the matter progesses.

6. Get a budget. Ask for a budget from the attorney. Insist that if it appears that something might cost more than the budgeted amount that you be contacted first and give your authorization. Get that in writing.

Generally, speaking be careful about the attorneys you retain and insist that you be kept informed about risks, benefits and fees throughout the time that they work for you.

About Me

Eric D. Morton has been an attorney for more than 25 years. He lives and works in Carlsbad, California. Eric's clients are business owners. He handles their business law and intellectual property matters. If necessary, Eric's firm will litigate but the primary emphasis is to keep clients out of trouble.